Could oil mania be coming to an end?

Speculation has driven up prices – but things could be about to change, some analysts say

What Gordon Brown has described as the most serious financial crisis since the 1930s, appears to be over as suddenly as it began.

While the slowdown in Britain and Europe has only just started, the US economy now seems likely to avoid an outright recession as Washington’s huge tax cuts, interest rate reductions and bank and mortgage bailouts appear in the nick of time over the economic horizon, just like the US cavalry riding to the rescue in a classic cowboy film. As these measures start gaining traction we should see fewer of the panicky headlines about a return to the Great Depression, even if the worst is still to come for the British housing market, the City of London and indeed the European economy, as I think it is.


But looking beyond our parochial concerns at the global prospects, there is now only one key uncertainty marring the signs of improvement: the huge increase in energy, food and other commodity prices since the start of this year. This now poses a far greater danger to the world economy and financial system than the correction in US and British housing markets and the related credit losses suffered by leading banks.

Commodity inflation is worse than housing and bank deflation for three main reasons.

Times of London